2 minutes read

Many businesses have been heavily impacted by the coronavirus pandemic and have survived through the receipt of various government subsidies. These subsidies have been a welcome lifeline, but what happens to your cash flow now they’ve ended?

Banks are being supported and encouraged to lend by the government, but it doesn’t mean that they will relax their lending criteria. We all know that they like ‘bricks and mortar’ security. Many small businesses cannot offer ‘bricks and mortar’, so what can they do to gain the funding support that they need?

The next biggest factor in getting a loan is the bank having confidence in you, the business owner, as someone who really knows what’s going on in their business and importantly, knows what’s going on with the finances and cash flows of the business.

A properly prepared funding submission will go a long way to creating confidence. So, what should this funding submission contain? These are the key elements of a 3 Way Forecast:

  • A detailed forecast of future revenues and expenses.
  • A detailed forecast of future cash flows, operating, investing, and financing. This demonstrates to the bank your capacity to service and repay debt.
  • A projected balance sheet.
  • These three elements of the forecast are, in bank language, a three-way forecast. Properly prepared, this document makes it much easier for the banks to consider and meet your funding request.
  • All the above forecast numbers need to commence with current financial data that shows exactly where the business stands at the commencement of the forecast period. (statutory accounts from two years ago won’t cut it).
  • And there needs to be a detailed written commentary that discusses your business plan and sets out the basis for the various assumptions that underlie the forecast numbers.

Put yourself in the best position to get the funding you need by being able to submit a professionally prepared funding application. These documents will not only tell you and your banker exactly what your funding needs will be but, as a bonus, will also point to ways that you can improve business outcomes.

Click here to discuss how we can help you to get this information together for your loan application.